91-day Treasury bill drops to record low

MANILA, Philippines – The yields of the short-dated Treasury bills (T-bills) fell across the board to new record lows yesterday as investors swarmed the last auction of government debt papers by the Bureau of Treasury (BTr) for this year.

The benchmark 91-day T-bills fetched a new all-time low of 0.775 percent or 67.5 basis points lower than the previous record low of 1.48 percent last Nov. 15 while the yield of the 182-day debt papers plunged by 33.3 basis points to a new low of 1.650 percent from 1.985 percent.

The yield of the 364-day government instrument, on the other hand, retreated by 1.1 basis points to 2.383 percent from 2.394 percent.

National Treasurer Roberto Tan said in an interview with reporters that investors scrambled to place their investments in T-bills during yesterday’s auction which is most likely the last for the year.

“There is so much funds in the system so they are trying to park it. Everybody is scrambling for earnings placements,” Tan stressed.

Data showed that tenders for the 91, 182, and 364-day T-bills reached P20.39 billion or almost three times the issue size of P7 billion.

Bids for the three-month T-bills reached P4.1 billion or four times the issue size of P1 billion while that of six-month debt papers amounted to P8.33 billion or more than three times the issue size of P2.5 billion. Tenders for the one-year T-bills reached P7.96 billion or more than double the issue size of P3.5 billion.

He pointed out that yesterday’s auction was likely the last for the year as the treasury intends to call off the auction of the 10-year Treasury bonds (T-bonds) next week with the launching of the government’s debt consolidation program where it intends to swap peso-denominated bonds for new 10- and 25-year T-bonds.

“We may cancel the auction of P8 billion 10-year T-bonds next week in lieu of the bond exchange. If the bond exchange progresses then the 10 year T-bonds auction will be cancelled,” Tan said.

Tan attributed the steady decline in the yields of the short-dated T-bills to the strong liquidity in the market, the benign inflation outlook, and the neutral stance of the Bangko Sentral ng Pilipinas (BSP) maintaining its key policy rates at record lows.

The BSP sees inflation in November averaging between two percent to 2.9 percent or lower than the full-year target of 3.5 percent to 5.5 percent this year. Inflation averaged four percent in the first 10 months of the year from 4.1 percent in the same period last year after easing to an 11-month low of 2.8 percent in October.

On the other hand, foreign capital continued to flood emerging markets including the Philippines as hot money inflows amounted to $3.44 billion as of the second week of November.

Tan said the government would launch a domestic bond swap this week after getting the greenlight from Malacañang to pursue a debt management program aimed at lengthening the maturity of the country’s debt profile.

President Aquino gave its go signal to a proposed bond swap wherein the government would issue 10- and 25-year treasury bonds (T-bonds) that could be exchanged with existing shorter-dated debt papers worth about P1.63 trillion. –Lawrence Agcaoili (The Philippine Star)